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Vonage Inc., a flat-fee IP phone carrier that has made a lot of noise serving residential customers, now is rolling out bargain bundles of services for small businesses.

Customer sites with broadband Internet connections can get Small Business Basic service with a 1,500-minute-per-month calling plan in the U.S. and Canada for US$39.95, or Small Business Unlimited plan for US$49.95. A one-line service comes with call waiting, call forwarding, call transfer, voice mail, redial, caller ID, caller-ID blocking and a fax line. Additional phone lines cost US$34.99 per month.

Customers can save money by getting rid of traditional phone lines and using broadband Internet links for phone traffic. A user would plug his regular phone into a Cisco Systems Inc. analogue telephone adapter that Vonage provided and connect the adapter to a DSL or cable modem connection. It’s ready to use once Vonage activates the service. The adapter converts voice traffic to IP and passes it off to the Internet via backbone providers including UUNET and AT&T Corp. Calls can be completed to customers served by IP providers or traditional phone carriers.

Allen Tsong, managing director of handbag-maker Yan’s NY, says his company uses Vonage’s service for outgoing calls because it costs less than using Verizon. Yan’s still uses Verizon for incoming calls to its toll-free number. Tsong plans to install a PC-based PBX between the Verizon and Vonage phone lines and the telephone handsets so employees don’t have to worry about picking up the correct phone. The PBX will direct outbound calls from any phone to the Vonage lines.

Because its services are based on IP and Session Initiation Protocol, Vonage can blend voice with data to create new services. For instance, Vonage’s voice mail notifies customers via e-mail when they have a voice message. Those messages can be sent as audio-file attachments. Later this year, Vonage plans to roll out a service that enables voice phone calls from computers using telephony software.

The service has limitations. If the electricity goes out, the service dies unless the customer has a back-up power supply. To get 911 calls to work, customers have to register the physical location of the phone in a database so police and fire departments know where to respond. Traditional phone networks link phone numbers to a particular pair of wires that can’t be moved, but the Cisco adapter can be moved to any Internet connection. Also, it is cumbersome to add a second phone line because it requires stringing together two adapters.

Tsong says Vonage relies on its customers’ ISP to deliver a broadband Internet connection, and that means if the ISP has a problem, so does the Vonage service.

For an extra $4.99 per month, per number, customers can buy extra phone numbers for the same line. So a single Vonage customer phone can receive calls based on a variety of phone numbers with a variety of area codes. This lets people dial local numbers in several different cities and connect with a single Vonage phone line, similar to toll-free-number service, but less expensive. Even though toll-free service works anywhere, Vonage supports phone numbers in only 137 of about 300 area codes in the U.S.

For Internet connections where bandwidth might be pinched because an ISP is oversubscribing its network, customers can go online to turn on voice compression, shrinking the bandwidth needed for a call to an eighth or less of its uncompressed size. They also can set call-forwarding numbers and activate or deactivate features such as caller-ID blocking.

Vonage says it will add conferencing and auto-attendant services by year-end.

Vonage opened in 2002 and says it has 30,000 customers. Business customers are growing as a percentage of total customers. In March, 5 per cent of customers were businesses and that grew to 7 per cent in May. It is now 10 per cent.